Once considered to be the king of the video game industry, Nintendo (OTCPK: NTDOY) has taken a backseat to rivals in recent years. The high of the successful Wii was followed up by a less than lackluster performance by the Wii U. Most gamers didn’t even consider the Wii U and only contemplated purchasing Sony’s (NYSE: SNE) PlayStation or Microsoft’s (NASDAQ: MSFT) Xbox console. Nonetheless, Nintendo has persevered and has managed to maintain their profitability. Although the Wii U was undoubtedly a failure, the company’s games and handheld devices have helped prevent the company from slipping into the red.
Nintendo may not hold the crown for the entire gaming industry, but it still rules the handheld market with the Nintendo 3DS. That is unlikely to change, since little has been said about upcoming handheld consoles from any companies. Despite the good news, Nintendo still has a few problems on their hands. The company’s profits have continued to sink over the past few years. For the year ending March 31, 2015, Nintendo brought in 549,780 million yen in net sales. The figures dropped 8.2% for the year ending March 31, 2016 to 504,459 million yen.
Net income per share also shrunk sizably from 353.49 to 137.40 yen. Even worse is that fact that gamers have become somewhat skeptical of the company’s abilities to produce a worthy console. The company’s refusal to release any details regarding their upcoming NX console isn’t helping matters in the least. Gamers are sincerely worried Nintendo will attempt to sell another gimmicky product that fails to impress and leads to diminished 3rd party developer support, hence another Wii U. These are definitely the risks involved with buying Nintendo, but patient investors, who are willing to long the stock may be gifted for their patience.
Nintendo has finally embraced mobile gaming with the release of the Miitomo mobile app. The app has proven to be a success and it may very well change Nintendo’s mindset on mobile gaming. A few other potential blockbusters are ahead.
The Upcoming Year
At the time of this writing, Nintendo’s stock has plummeted to $17.495. The NTDOY stock has a 52-week-range of $15.34 to $25.711. The stock price has dropped off a solid $8 and is much closer to its 52-week low than the high. While, I sincerely believe the stock price could sink lower with market uncertainty and other factors, I also see upside for the stock in the coming year. Of course, the degree of success Nintendo investors will experience depends solely on the success of the Nintendo NX, which is tentatively scheduled to be released in March of 2017. Sadly, Nintendo has no intention of making the 2016 Holiday season deadline, but March isn’t too bad timing for American consumers.
The tax season might not parallel the spending heights of the Holidays, but it is better than nothing. At the same time, Nintendo has a few additional tricks up their sleeve and these cards will likely propel Nintendo’s bottom line higher than the previous year. Nintendo is expected to release two new Pokémon games in the winter of 2016, which will make the American holidays. The Pokémon series is undeniably profitable and the releases could increase software sales and potentially even lead to a spike in handheld hardware sales.
The company is also expected to release new Kirby and Metroid games during this time period. Both have a strong following and will likely prove to be success stories. The company has also announced their intention to continue strengthening the Amiibo line in the coming year. With the success of the Miitomo, Nintendo will definitely want to stick with the mobile developments and the company has admitted they plan to do just that. The company intends to continuously release new mobile apps to expand their revenue base.
According to the company’s projections, they’ll be able to bring in net sales of 500.0 billion yen and an operating income of 45.0 billion yen by the end of the March 31, 2017 fiscal year. This will likely not include profits from the Nintendo NX, since it releases shortly before this time period, but investors should have an ideal of how well the console is going to perform at this point. Another thing to consider is the upcoming release of The Legend of Zelda: Breath of the Wild, which has been put on hold since 2013.
The game, which stole the show at E3, is scheduled to be released at the same time as the NX and will be available on the new console, as well as the Wii U. Although consumers are unlikely to purchase a Wii U for the game, the timing of the release could very well convince them to purchase the NX, if the console proves to be worthy. Nonetheless, uncertainty remains.
The Upside – Disclosure
I sincerely believe Nintendo came make a solid turnaround in the months and years ahead. The company has made the right moves with the mobile gaming venture and their upcoming Pokémon releases could be blockbusters. I also like Nintendo’s apprehension of virtual reality. The company has apparently started to research the technology, but they seem to be holding off for the time being. Or, maybe they’re not? Who knows what the NX holds in store? The uncertainty is certainly concerning.
Nonetheless, I see a bright future for Nintendo. I am not accredited, certified or affiliated with Nintendo in any way. However, I may go long on Nintendo, if the price drops a little lower.